Exploring the relationship between environmentally related taxes and inequality in income sources

Abstract

By Walid Oueslati (1), Vera Zipperer (2), Damien Rousselière (3) and Alexandros Dimitropoulos (1) (1) OECD Environment Directorate (2) DIW Berlin (3) University of Angers OECD Working Papers should not be reported as representing the official views of the OECD or of its member countries. The opinions expressed and arguments employed are those of the author(s).

Public finance structure and inclusive growth

“…Environmental taxes may have distributional consequences for consumption that can differ from the ones for disposable income with the possibility that they may be more regressive. The reason is that the composition of consumption, in particular its share of transport and heating fuels, varies with the income level (OECD/KIPF, 2014 [50]; Flues and Thomas, 2015 [51]).…”

“…These countries can still have room to raise more revenue from VAT by broadening its base, especially by eliminating reduced rates and exemptions. VAT often raises concerns of possible regressivity; however, recent OECD analysis indicates that, in most countries, it is slightly progressive when measured over expenditure (rather than income), which corresponds to a lifetime (rather than point-in-time) perspective (OECD/KIPF, 2014 [50]). • Transaction taxes are generally seen as negative for long-term output, as they hinder factor reallocation (Diamond and Mirrlees, 1971[74]).…”